OCBC Group Full Year 2018 Net Profit Grew 11% to a Record S$4.49 billion. Fourth quarter earnings from banking operations rose 22%

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1 Media Release OCBC Group Full Year 2018 Net Profit Grew 11% to a Record S$4.49 billion Fourth quarter earnings from banking operations rose 22% Proposed final dividend of 23 cents per share, up 15% from 2018 interim dividend of 20 cents Singapore, 22 February 2019 Oversea-Chinese Banking Corporation Limited ( OCBC Bank ) reported a net profit after tax of S$4.49 billion for the financial year ended 31 December 2018 ( FY18 ), up 11% from S$4.05 billion a year ago ( FY17 ). This was driven by record earnings from the Group s banking operations which rose 22% year-on-year, led by income growth, disciplined cost control and lower allowances. The Group s FY18 return on equity increased to 11.5% from 11.0% a year ago. The Group s total income climbed to a new high of S$9.70 billion from S$9.53 billion in the previous year. Net interest income increased 9% year-on-year to S$5.89 billion from S$5.42 billion in FY17, underpinned by loan growth and a rise in net interest margin ( NIM ). Customer loans grew 9% to S$258 billion across all key markets. FY18 NIM improved by 5 basis points to 1.70% from higher margins in Singapore, Malaysia and Greater China. Non-interest income of S$3.81 billion declined 7% from the previous year, mainly attributed to lower investment income from Great Eastern Holdings ( GEH ), even though non-interest income from banking operations rose 4% year-on-year. The Group s net fees and commissions grew 4% to S$2.03 billion, led by higher wealth management, credit card, loan and trade-related fees. FY18 wealth management fee income was up 5% at S$958 million, despite slower fourth quarter performance as a result of weak investment sentiments during the quarter. Net trading income was 1% lower from a year ago at S$508 million, while income from life and general insurance was little changed at S$911 million. Net gains from sale of investment securities were significantly lower at S$16 million as compared to S$431 million a year ago, as substantially higher gains were realised from the divestment of investment securities by GEH in the prior year. Operating expenses were S$4.21 billion in FY18 and 4% above a year ago, with the cost-to-income ratio ( CIR ) at 43.4%. Allowances for loans and other assets of S$288 million were below S$671 million a year ago. The Group s share of results of associates rose 17% to S$455 million from S$389 million a year ago. Earnings per share increased to S$1.06 from S$0.95 in FY17. Co.Reg.no.: W 1

2 Fourth Quarter Performance For the fourth quarter of 2018 ( 4Q18 ), net profit after tax from banking operations grew 22% from a year ago ( 4Q17 ) to S$817 million. However, the Group s overall net profit was 11% lower at S$926 million due to a decline in earnings contribution from GEH. The Group s net interest income rose 7% to S$1.52 billion from S$1.42 billion in 4Q17. This was driven by loan growth and a 5 basis points rise in NIM to 1.72%. Non-interest income fell 32% to S$830 million, led by a drop in investment and insurance income from GEH. Net fees and commissions also declined 4% from a year ago to S$474 million. Higher credit card, loan and trade-related fees were more than offset by a fall in wealth management fees attributable to subdued investment sentiments in the current market environment. Nonetheless, Bank of Singapore continued to report strong net new money inflows, which increased private banking assets under management ( AUM ) to US$102 billion (S$139 billion) as at 31 December 2018, up 3% from a year ago. 4Q18 net trading income was lower at S$9 million as compared to S$99 million a year ago, largely attributable to unrealised mark-to-market losses in GEH s investment portfolio as a result of unfvourable market conditions. Excluding GEH, trading income from banking operations was 5% higher year-on-year. Operating expenses for 4Q18 of S$1.08 billion were unchanged from the previous year, as costs were tightly-controlled. Allowances of S$205 million for the quarter were 14% higher than S$178 million in 4Q17. As compared to the previous quarter ( 3Q18 ), the Group s net profit after tax was down 26% as higher net interest income was offset by a fall in non-interest income and increased allowances. Allowances and Asset Quality Net allowances for loans and other assets for FY18 were S$288 million, significantly lower than the S$671 million in FY17. 4Q18 allowances of S$205 million were up 14% year-on-year, mainly from allowances made for loans in the general commerce sector and for previously identified groups in the oil and gas support vessels and services sector. Overall asset quality of the loan portfolio continued to be healthy. As at 31 December 2018, total nonperforming assets were S$3.94 billion, higher than S$3.59 billion a quarter ago, with the increase coming mainly from the general commerce sector. The non-performing loans ratio of 1.5% was flat as compared to the prior year and higher than 1.4% reported in the previous quarter. Funding and Capital Position The Group maintained its strong funding and capital position. Customer loans grew 9% year-on-year to S$258 billion while customer deposits were up 4% at S$295 billion, with current account and savings ( CASA ) deposits representing 46.4% of total non-bank deposits. The Group s loans-to-deposits ratio was 86.4% as compared to 82.5% a year ago. Co.Reg.no.: W 2

3 The average Singapore dollar and all-currency liquidity coverage ratios for the Group in 4Q18 were 265% and 156% respectively, while the net stable funding ratio was 109%. The Group s Common Equity Tier 1 capital adequacy ratio ( CAR ), Tier 1 CAR and Total CAR as at 31 December 2018 were 14.0%, 14.8% and 16.4% respectively. The Group s leverage ratio was 7.2% as at 31 December These regulatory ratios were all above their respective regulatory requirements. Subsidiaries Full Year Performance Great Eastern Holdings net profit after tax was S$741 million for the year, 29% lower than S$1.04 billion in FY17. Although operating profit from its underlying insurance business grew year-on-year, this was more than offset by unrealised mark-to-market losses in its investment portfolio and the absence of substantial gains from the sale of investment securities that were realised a year ago. GEH s contribution to the Group s net profit, after deducting amortisation of intangible assets and noncontrolling interests, was S$604 million, representing 13% of the Group s earnings, as compared to 21% in the prior year. Total weighted new sales and new business embedded value ( NBEV ) were S$1.24 billion and S$528 million respectively in FY18, while NBEV margin rose to 42.7% from 41.4% a year ago. Embedded value, a measure of the economic value of the existing business of a life insurance company, rose 0.4% year-on-year to S$13.44 billion. Both OCBC Wing Hang and Bank OCBC NISP reported record net profit after tax in local currency terms in FY18. OCBC Wing Hang s net profit increased 15% from a year ago to HK$2.76 billion (S$475 million), driven by broad-based income growth. Its customer loans rose 8% to HK$193 billion (S$34 billion) while deposits were relatively stable at HK$222 billion (S$39 billion). Bank OCBC NISP reported a 21% rise in full year net profit of IDR2.64 trillion (S$251 million), backed by strong net interest income growth and lower allowances. Customer loans and deposits both grew 11% year-on-year to IDR118 trillion (S$11 billion) and IDR126 trillion (S$12 billion) respectively. OCBC Bank Malaysia s FY18 net profit after tax fell 14% to RM814 million (S$272 million), as net interest income growth was offset by a decline in other income segments, while allowances were higher than the previous year. Customer loans were up 2% year-on-year at RM69 billion (S$23 billion) and deposits rose 3% to RM76 billion (S$25 billion). As at 31 December 2018, Bank of Singapore s AUM grew 3% to US$102 billion (S$139 billion) from US$99 billion (S$132 billion) a year ago, driven by sustained net new money inflows. Including secured loans, its earnings asset base grew 4% to US$125 billion (S$171 billion) from US$121 billion (S$161 billion) in the previous year. The Group s overall wealth management-related income comprising income from insurance, private banking, asset management, stockbroking and other wealth management products was S$2.84 billion in FY18 and represented 29% of the Group s total income. Co.Reg.no.: W 3

4 Final Dividend Supported by record earnings and a strong capital position, the Board has proposed a final tax-exempt dividend of 23 cents per share, representing an increase of 21% from the final dividend of 19 cents a year ago and a 15% rise from the interim dividend of 20 cents. Together with the interim dividend of 20 cents per share, this will bring the FY18 total dividend to 43 cents, up 16% or 6 cents, from 37 cents per share in FY17. To continue to provide our shareholders with the option of reinvesting in OCBC Bank, the Scrip Dividend Scheme will be applicable to the final dividend. The estimated total dividend payout will amount to S$1.82 billion, an increase of 17% from FY17. This represents a dividend payout ratio of 40% of the Group s core net profit in FY18. CEO s Comments Commenting on the Group s performance and outlook, CEO Samuel Tsien said: Despite the market uncertainties and challenging investment environment particularly impacting the investment portfolio in our insurance business in the last quarter of the year, we are pleased to have delivered strong results for Our record earnings demonstrate the strength and resilience of our diversified business and the depth of our customer relationships. Backed by sustained earnings growth from banking operations and our strong capital position, we are delighted to reward our shareholders for their support by raising the total dividend by 16% or 6 cents from a year ago to 43 cents per share in Looking ahead, global economic growth is expected to slow on concerns of continued trade and geopolitical tensions, subdued market and investment sentiments and rising policy risks in the advanced economies. In spite of the uncertain outlook, we are confident that our focused strategy, strong capital and funding base, and disciplined cost control will allow us to continue to prudently expand our franchise in our key markets and support our customers. Co.Reg.no.: W 4

5 About OCBC Bank OCBC Bank is the longest established Singapore bank, formed in 1932 from the merger of three local banks, the oldest of which was founded in It is now the second largest financial services group in Southeast Asia by assets and one of the world s most highly-rated banks, with an Aa1 rating from Moody s. Recognised for its financial strength and stability, OCBC Bank is consistently ranked among the World s Top 50 Safest Banks by Global Finance and has been named Best Managed Bank in Singapore by The Asian Banker. OCBC Bank and its subsidiaries offer a broad array of commercial banking, specialist financial and wealth management services, ranging from consumer, corporate, investment, private and transaction banking to treasury, insurance, asset management and stockbroking services. OCBC Bank s key markets are Singapore, Malaysia, Indonesia and Greater China. It has more than 570 branches and representative offices in 19 countries and regions. These include over 300 branches and offices in Indonesia under subsidiary Bank OCBC NISP, and more than 100 branches and offices in Hong Kong, China and Macau under OCBC Wing Hang. OCBC Bank s private banking services are provided by its wholly-owned subsidiary Bank of Singapore, which operates on a unique open-architecture product platform to source for the best-in-class products to meet its clients goals. OCBC Bank's insurance subsidiary, Great Eastern Holdings, is the oldest and most established life insurance group in Singapore and Malaysia. Its asset management subsidiary, Lion Global Investors, is one of the largest private sector asset management companies in Southeast Asia. For more information, please visit For more information, please contact: Koh Ching Ching Head, Group Brand and Communications Tel: (65) Fax: (65) Collins Chin Head, Investor Relations Tel: (65) Fax: (65) Co.Reg.no.: W 5

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7 To Our Shareholders The Board of Directors of Oversea-Chinese Banking Corporation Limited (OCBC) reports the following: Audited Financial Results for the Financial Year Ended 31 December 2018 For the financial year ended 31 December 2018, Group reported net profit after tax was S$4.49 billion. Details of the audited financial results are in the accompanying Group Financial Report. Ordinary Dividend A final tax-exempt dividend of 23 cents per share has been recommended for the financial year Including the interim net dividend of 20 cents per share paid in October 2018, total dividends for financial year 2018 would amount to 43 cents per share. Closure of Books The books closure date is 6 May Please refer to the separate announcement titled Notice of Books Closure and Application of Scrip Dividend Scheme to FY18 Final Dividend released by the Bank today. Scrip Dividend Scheme The Scrip Dividend Scheme will be applicable to the final dividend. The issue price for the new shares, to be allotted to shareholders who have elected to receive scrip for the final dividend, will be set at a 10% discount to the average of the daily volume weighted average prices of the shares for each of the market days during the price determination period between 3 May 2019 (the ex-dividend date) to 6 May 2019 (the books closure date), both dates inclusive. Further details can be found in a separate announcement titled Application of Scrip Dividend Scheme to FY18 Final Dividend released by the Bank today. Peter Yeoh Secretary Singapore, 22 February 2019 More details on the results are available on the Bank s website at Co. Reg. no.: W

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9 Oversea-Chinese Banking Corporation Limited Financial Year 2018 Group Financial Report Incorporated in Singapore Company Registration Number: W

10 CONTENTS Financial Summary 2 Financial Review Net Interest Income 5 Non-Interest Income 7 Operating Expenses 8 Allowances for Loans and Other Assets 8 Customer Loans 9 Non-Performing Assets 10 Cumulative Allowances for Assets 12 Deposits 13 Debt Issued 13 Capital Adequacy Ratios 14 Performance by Business Segment 15 Performance by Geographical Segment 20 Half-Yearly Income and Profit 20 Financial Statements Audited Consolidated Income Statement 21 Audited Consolidated Statement of Comprehensive Income 22 Audited Balance Sheets 23 Audited Statement of Changes in Equity Group For the financial year ended 31 December For the three months ended 31 December 2018 (Unaudited) 25 Audited Statement of Changes in Equity Bank For the financial year ended 31 December For the three months ended 31 December 2018 (Unaudited) 26 Audited Consolidated Cash Flow Statement 27 Share Capital and Options on Shares in the Bank 28 Other Matters 29 Attachment: Independent Auditors Report Notes: 1. Certain comparative figures have been restated to conform with the current period s presentation. 2. Amounts less than S$0.5 million are shown as nm denotes not meaningful Financial Results 1

11 FINANCIAL SUMMARY OCBC Group adopted a new financial reporting framework, Singapore Financial Reporting Standards (International) ( SFRS(I) ) with effect from 1 January OCBC Group prepared its first set of financial statements for the first quarter of 2018 in accordance with SFRS(I). The following new/revised financial reporting standards and interpretations were applied with effect from 1 January 2018: SFRS(I) 9 SFRS(I) 15 SFRS(I) 1-28 (Amendments) SFRS(I) 1-40 (Amendments) SFRS(I) 2 (Amendments) SFRS(I) 4 (Amendments) SFRS(I) INT 22 Financial Instruments Revenue from Contracts with Customers Measuring an Associate or Joint Venture at Fair Value Investment Property: Transfers of Investment Property Share-based Payment: Classification and Measurement of Share-based Payment Transactions Insurance Contracts: Applying SFRS(I) 9 Financial Instruments with SFRS(I) 4 Insurance Contracts Foreign Currency Transactions and Advance Consideration On initial implementation of SFRS(I), OCBC Group was required to apply the specific transition requirements in SFRS(I) 1 First-time Adoption of Singapore Financial Reporting Standards (International). In this regard, the date of transition to SFRS(I) for the Group is 1 January 2017, unless otherwise stated. The initial application of the above standards (including their consequential amendments) and interpretations did not have a significant impact on the Group s financial statements, except for SFRS(I) 1 First-time Adoption of Singapore Financial Reporting Standards (International) and SFRS(I) 9 Financial Instruments. Financial Results The Group reported a net profit after tax of S$4.49 billion for the financial year ended 31 December 2018 ( FY18 ), 11% higher as compared to S$4.05 billion a year ago ( FY17 ). FY18 net interest income rose 9% to S$5.89 billion from S$5.42 billion a year ago, underpinned by loan growth and improved net interest margin. Non-interest income was down 7% to S$3.81 billion, from S$4.11 billion in FY17. Net fees and commissions were S$2.03 billion, 4% above S$1.95 billion in FY17, driven by higher wealth management, credit card, loan and trade-related fees. Net trading income of S$508 million was 1% lower from S$515 million a year ago, while income from life and general insurance was little changed at S$911 million. Net realised gains from the sale of investment securities were S$16 million as compared to S$431 million a year ago, which included higher gains realised by Great Eastern Holdings ( GEH ) from the divestment of investment securities in FY17. The Group s share of results of associates of S$455 million was 17% higher than the S$389 million reported a year ago. Operating expenses grew 4% to S$4.21 billion in FY18, from S$4.04 billion a year ago. Total allowances for loans and other assets were lower at S$288 million, as compared to S$671 million in FY17. The Group s non-performing loans ( NPL ) ratio was 1.5% as at 31 December 2018, unchanged from a year ago. Return on equity was 11.5% in FY18, an increase from 11.0% a year ago. Earnings per share was S$1.06, up from S$0.95 in FY17. The Group s unrealised valuation surplus as at 31 December 2018 amounted to S$7.72 billion. The unrealised valuation surplus represents the difference between the carrying amounts and market values of its properties, investments in associates and quoted subsidiaries. The Group net profit after tax for the fourth quarter of 2018 ( 4Q18 ) was S$926 million, a 11% decline from S$1.03 billion a year ago, and 26% lower from S$1.25 billion in the previous quarter. The year-on-year decline was largely attributable to lower earnings contribution from GEH Financial Results 2

12 FINANCIAL SUMMARY (continued) S$ million /(-) 4Q18 4Q17 +/(-) 3Q18 +/(-) % % % Selected Income Statement Items Net interest income 5,890 5, ,520 1, ,505 1 Non-interest income 3,811 4,105 (7) 830 1,214 (32) 1,039 (20) Total income 9,701 9, ,350 2,638 (11) 2,544 (8) Operating expenses (4,214) (4,043) 4 (1,078) (1,075) (1,069) 1 Operating profit before allowances and amortisation 5,487 5,485 1,272 1,563 (19) 1,475 (14) Amortisation of intangible assets (102) (104) (2) (26) (26) 1 (26) Allowances for loans and other assets (288) (671) (57) (205) (178) 14 (49) 311 Operating profit after allowances and amortisation 5,097 4, ,041 1,359 (23) 1,400 (26) Share of results of associates (37) Profit before income tax 5,552 5, ,126 1,387 (19) 1,534 (27) Net profit attributable to shareholders 4,492 4, ,034 (11) 1,245 (26) Cash basis net profit attributable to shareholders 1/ 4,594 4, ,060 (10) 1,271 (25) Selected Balance Sheet Items Ordinary equity 40,637 37, ,637 37, ,835 2 Equity attributable to equity holders of the Bank 42,137 39, ,137 39, ,335 2 Total assets 467, , , , ,115 1 Assets excluding life insurance fund investment assets 390, , , , ,938 1 Net customer loans 255, , , , ,823 1 Deposits of non-bank customers 295, , , , ,686 3 Notes: 1. Excludes amortisation of intangible assets. 2. Comparative figures have been restated with the adoption of SFRS(I) and GEH accounting policy change Financial Results 3

13 FINANCIAL SUMMARY (continued) Q18 4Q17 3Q18 Key Financial Ratios (%) Performance ratios Return on equity 1/ 2/ Return on assets 3/ Revenue mix/efficiency ratios Net interest margin Net interest income to total income Non-interest income to total income Cost-to-income Loans-to-deposits NPL ratio Capital adequacy ratios 8/ Common Equity Tier Tier Total Leverage ratio 5/ 8/ Liquidity coverage ratios 6/ 8/ Singapore dollar All-currency Net stable funding ratio 7/ 8/ 109 na 109 na 108 Earnings per share (S$) 2/ Basic earnings Diluted earnings Net asset value per share (S$) Before valuation surplus After valuation surplus Notes: 1. Preference equity, other equity instruments and non-controlling interests are not included in the computation for return on equity. 2. Calculated based on net profit less preference dividends and distributions on other equity instruments paid and estimated to be due at the end of the financial period. 3. Computation of return on assets excludes life insurance fund investment assets. 4. Return on equity, return on assets, net interest margin and earnings per share for the quarters are computed on an annualised basis. 5. The Group s Leverage ratio is computed based on MAS Notice The Group s Liquidity coverage ratios ( LCR ) are computed based on MAS Notice 649 and reported based on the average LCR for the respective periods. 7. The Group s Net stable funding ratio is computed based on MAS Notice Public disclosures required under MAS Notice 637 Notice on Risk Based Capital Adequacy Requirements for banks incorporated in Singapore, MAS Notice 651 Liquidity Coverage Ratio Disclosure and MAS Notice 653 Net Stable Funding Ratio Disclosure can be found in the Capital and Regulatory Disclosures section of the Bank s Investor Relations website ( 9. Comparative figures have been restated with the adoption of SFRS(I) and GEH accounting policy change. 10. na denotes not applicable Financial Results 4

14 NET INTEREST INCOME Average Balance Sheet Average Average Average Average S$ million Balance Interest Rate Balance Interest Rate % % Interest earning assets Loans and advances to non-bank customers 247,778 8, ,150 6, Placements with and loans to banks 50,110 1, ,616 1, Other interest earning assets 49,473 1, ,026 1, ,361 11, ,792 9, Interest bearing liabilities Deposits of non-bank customers 287,333 4, ,235 2, Deposits and balances of banks 8, , Other borrowings 31, , ,461 5, ,184 3, Net interest income/margin 1/ 5, , Q18 4Q17 3Q18 Average Average Average Average Average Average S$ million Balance Interest Rate 2/ Balance Interest Rate 2/ Balance Interest Rate 2/ % % % Interest earning assets Loans and advances to non-bank customers 253,624 2, ,732 1, ,847 2, Placements with and loans to banks 47, , , Other interest earning assets 48, , , ,988 2, ,117 2, ,499 2, Interest bearing liabilities Deposits of non-bank customers 290,710 1, , ,592 1, Deposits and balances of banks 7, , , Other borrowings 32, , , ,781 1, ,506 1, ,887 1, Net interest income/margin 1/ 1, , , Notes: 1. Net interest margin is net interest income as a percentage of interest earning assets. 2. Average rates are computed on an annualised basis Financial Results 5

15 NET INTEREST INCOME (continued) Net interest income rose 9% to S$5.89 billion in FY18, from S$5.42 billion a year ago, mainly driven by loan growth and a rise in net interest margin. Net interest margin was up 5 basis points at 1.70% from 1.65% in FY17 underpinned by higher margins in Singapore, Malaysia and Greater China. Net interest income for 4Q18 was S$1.52 billion, 7% higher than S$1.42 billion a year ago, largely attributable to loan growth and a 5 basis points increase in net interest margin to 1.72% from 1.67% a year ago. Compared with 3Q18, net interest income rose 1%. Volume and Rate Analysis 2018 vs Q18 vs 4Q17 4Q18 vs 3Q18 Increase/(decrease) due to change in: S$ million Volume Rate Net change Volume Rate Net change Volume Rate Net change Interest income Loans and advances to non-bank customers , Placements with and loans to banks (90) (48) Other interest earning assets (10) (8) 7 (1) 609 1,322 1, Interest expense Deposits of non-bank customers , Deposits and balances of banks (31) (4) (8) 4 (4) Other borrowings ,231 1, Impact on net interest income Due to change in number of days Net interest income Financial Results 6

16 NON-INTEREST INCOME S$ million /(-) 4Q18 4Q17 +/(-) 3Q18 +/(-) % % % Gross fee and commission income 2/ Brokerage (6) (25) 20 5 Wealth management (13) 238 (13) Fund management (1) 28 (2) Credit card (2) Loan-related (11) Trade-related and remittances Guarantees (7) 4 5 (19) 5 (16) Investment banking (5) Service charges Others (5) 13 (29) 2,326 2, (4) 580 (6) Fee and commission expense (295) (261) 13 (69) (74) (6) (78) (10) Fees and commissions (net) 2,031 1, (4) 502 (6) Dividends (75) Rental income (4) (6) 20 (3) Income from life and general insurance Profit from life insurance (4) (26) Premium income from general insurance Sub-total (1) (20) Other income Net trading income (1) 9 99 (91) 213 (96) Net gain from investment securities (96) (99) 4 (54) Net gain/(loss) from disposal of subsidiaries and associates 8 34 (76) 3 21 (85) (0) nm Net gain from disposal of properties (18) (7) Others Sub-total 662 1,075 (38) (80) 232 (68) Total non-interest income 3,811 4,105 (7) 830 1,214 (32) 1,039 (20) Fees and commissions (net)/total income 20.9% 20.5% 20.2% 18.6% 19.8% Notes: 1. Comparative figures have been restated with the adoption of SFRS(I) and GEH accounting policy change. 2. Comparative figures have been restated to conform with current period s presentation. Non-interest income in FY18 was S$3.81 billion, and was 7% lower as compared to S$4.11 billion a year ago. Net fees and commissions rose 4% to S$2.03 billion in FY18. This was largely driven by an increase in wealth management, credit card, loan and trade-related fees. FY18 wealth management fee income was up 5% at S$958 million, despite slower fourth quarter performance as a result of weak investment sentiments during the quarter. Net trading income was S$508 million and was slightly below the S$515 million a year ago. Income from life and general insurance was relatively unchanged from a year ago at S$911 million. Dividend income increased 67% to S$128 million from S$76 million in FY17. Net realised gains from the sale of investment securities was S$16 million as compared to S$431 million a year ago, which had included significantly higher gains realised by GEH from the divestment of investment securities in FY17. Compared to 4Q17, non-interest income declined 32%, led by lower investment income and insurance income from GEH Financial Results 7

17 OPERATING EXPENSES S$ million /(-) 4Q18 4Q17 +/(-) 3Q18 +/(-) % % % Staff costs 2,606 2, Property and equipment Depreciation Maintenance Rental expenses Others Other operating expenses (9) 218 (7) Total operating expenses 4,214 4, ,078 1,075 1,069 1 Group staff strength Period end 29,706 29, ,706 29, ,719 Average 29,549 29, ,736 29, ,657 Note: 1. Comparative figures have been restated with the adoption of SFRS(I) and GEH accounting policy change. Operating expenses grew 4% to S$4.21 billion in FY18 from S$4.04 billion a year ago. Staff costs were up 5% to S$2.61 billion, from S$2.47 billion in FY17. Property and equipment-related expenses were S$812 million, an increase of 2% from S$793 million a year ago. 4Q18 operating expenses were stable year-on-year. The cost-to-income ratio was higher at 43.4% in FY18 compared to 42.4% a year ago. ALLOWANCES FOR LOANS AND OTHER ASSETS S$ million /(-) 4Q18 4Q17 +/(-) 3Q18 +/(-) % % % Allowances/(write-back): Impaired loans 2/ Singapore (55) (50) Malaysia (79) (96) 30 (63) Greater China (59) (7) Others (85) (84) (63) ,407 (72) 250 1,055 (76) Impaired other assets 5 50 (90) (0) 10 (101) (2) 97 Non-impaired loans 3/ (90) (786) 89 (47) (887) 95 (45) (5) Non-impaired other assets (24) 2 (5) 150 Allowances for loans and other assets (57) Notes: 2. Referred to as specific allowances for periods prior to Referred to as portfolio allowances for periods prior to Allowances for loans and other assets were S$288 million in FY18, lower than S$671 million a year ago when allowances were set aside for corporate accounts in the oil and gas support vessels and services sector. Allowances for loans and other assets were S$205 million for the quarter, an increase as compared to S$178 million a year ago and S$49 million in the previous quarter, mainly from allowances made for loans in the general commerce sector and for previously identified groups in the oil and gas support vessels and services sector Financial Results 8

18 CUSTOMER LOANS S$ million 31 Dec Dec Sep 2018 Loans to customers 248, , ,258 Bills receivable 9,379 7,798 9,318 Gross customer loans 257, , ,576 Allowances Impaired loans (1,219) (1,236) (1,267) Non-impaired loans (984) (1,417) (1,027) 255, , ,282 Less: assets pledged (309) (527) (459) Net customer loans 255, , ,823 By Maturity Within 1 year 107,516 96, ,400 1 to 3 years 41,075 36,861 38,569 Over 3 years 109, , , , , ,576 By Industry Agriculture, mining and quarrying 8,894 8,073 10,056 Manufacturing 16,703 12,501 16,399 Building and construction 53,572 35,436 51,463 Housing loans 64,753 64,542 65,553 General commerce 34,664 29,010 34,959 Transport, storage and communication 13,917 11,568 13,832 Financial institutions, investment and holding companies 2/ 22,144 37,838 20,801 Professionals and individuals 30,373 28,704 30,698 Others 12,685 9,649 12, , , ,576 By Currency Singapore Dollar 91,640 85,485 90,067 United States Dollar 67,248 61,445 67,907 Malaysian Ringgit 20,870 20,481 20,942 Indonesian Rupiah 8,695 7,795 8,437 Hong Kong Dollar 35,195 33,011 35,714 Chinese Renminbi 4,502 4,626 4,708 Others 29,555 24,478 28, , , ,576 By Geography 1/ Singapore 108,169 99, ,897 Malaysia 29,649 28,231 29,931 Indonesia 19,660 19,259 20,073 Greater China 64,404 59,114 65,929 Other Asia Pacific 13,595 12,754 13,457 Rest of the World 22,228 18,091 21, , , ,576 Notes: 1. Loans by geography are based on where the credit risks reside, which may be different from the borrower s country of residence or the booking location of the loans. 2. Exposure to investment and other holding companies were recategorised to the underlying industries. Gross customer loans were S$258 billion as at 31 December 2018, and were higher from a year ago and the previous quarter. In constant currency terms, customer loans grew 8% year-on-year and 1% quarter-on-quarter. 2/ 2018 Financial Results 9

19 NON-PERFORMING ASSETS S$ million Total NPAs 1/ Substandard Doubtful Loss Secured NPAs/ Total NPAs NPLs 2/ NPL Ratio 2/ % % Singapore 31 Dec , , Sep , , Dec , , Malaysia 31 Dec Sep Dec Indonesia 31 Dec Sep Dec Greater China 31 Dec Sep Dec Other Asia Pacific 31 Dec Sep Dec Rest of the World 31 Dec Sep Dec Group 31 Dec ,938 2,356 1, , Sep ,594 2, , Dec ,468 2, , Notes: 1. Comprise non-bank loans, debt securities and contingent liabilities. 2. Exclude debt securities and contingent liabilities Financial Results 10

20 NON-PERFORMING ASSETS (continued) The Group s asset quality remained sound. Non-performing assets ( NPAs ) were S$3.94 billion as at 31 December 2018, and were 14% higher than S$3.47 billion a year ago. The year-on-year increase was led by loans to the general commerce sector. The Group s NPL ratio was unchanged from a year ago at 1.5%. Of the total NPAs, 60% were in the substandard category and 67% were secured by collateral. 31 Dec Dec Sep 2018 % of % of % of S$ million loans S$ million loans S$ million loans NPLs by Industry Loans and advances Agriculture, mining and quarrying Manufacturing Building and construction Housing loans General commerce Transport, storage and communication 1, , , Financial institutions, investment and holding companies 1/ / Professionals and individuals Others Total NPLs 3, , , Classified debt securities Classified contingent liabilities Total NPAs 3,938 3,468 3, Dec Dec Sep 2018 S$ million % S$ million % S$ million % NPAs by Period Overdue Over 180 days 1, , , Over 90 to 180 days to 90 days Less than 30 days Not overdue 1, , , , , , S$ million 31 Dec Dec Sep 2018 Loan Allowance Loan Allowance Loan Allowance Restructured Loans Substandard Doubtful Loss , Note: 1. Exposure to investment and other holding companies were recategorised to the underlying industries Financial Results 11

21 CUMULATIVE ALLOWANCES FOR ASSETS 1/ Total cumulative allowances Allowances for impaired assets 2/ Allowances for non-impaired assets 3/ Allowances for impaired assets as % of total NPAs Cumulative allowances as % of total NPAs S$ million % % Singapore 31 Dec , Sep , Dec Malaysia 31 Dec Sep Dec Indonesia 31 Dec Sep Dec Greater China 31 Dec Sep Dec Other Asia Pacific 31 Dec Sep Dec Rest of the World 31 Dec Sep Dec Group 31 Dec ,769 1,221 1, Sep ,798 1,269 1, Dec ,666 1,249 1, Notes: 1. Included regulatory loss allowance reserve. 2. Referred to as specific allowances for periods prior to Referred to as portfolio allowances for periods prior to As at 31 December 2018, the Group s total cumulative allowances for assets were S$2.77 billion, comprising S$1.22 billion in allowances for impaired assets and S$1.55 billion in allowances for non-impaired assets. The cumulative allowances represented 211% of unsecured NPAs and 70% of total NPAs Financial Results 12

22 DEPOSITS S$ million 31 Dec Dec Sep 2018 Deposits of non-bank customers 295, , ,686 Deposits and balances of banks 7,576 7,485 9, , , ,827 Total Deposits By Maturity Within 1 year 297, , ,004 1 to 3 years 2,749 1,328 2,574 Over 3 years 2,537 1,842 2, , , ,827 Non-Bank Deposits By Product Fixed deposits 131, , ,616 Savings deposits 52,796 51,817 52,245 Current account 84,295 87,773 84,074 Others 26,711 25,974 22, , , ,686 Non-Bank Deposits By Currency Singapore Dollar 105,327 97, ,924 United States Dollar 91,036 93,415 89,380 Malaysian Ringgit 23,297 22,364 22,822 Indonesian Rupiah 9,474 8,206 7,835 Hong Kong Dollar 28,428 28,640 28,718 Chinese Renminbi 7,674 7,551 8,048 Others 30,176 25,801 26, , , ,686 Non-bank customer deposits as at 31 December 2018 were S$295 billion, up 4% from a year ago and 3% higher than the previous quarter. The ratio of current account and savings deposits to total non-bank deposits was 46.4% as at 31 December The Group s loans-to-deposits ratio was 86.4%, as compared to 82.5% a year ago and 88.5% in the previous quarter. DEBT ISSUED S$ million 31 Dec Dec Sep 2018 Unsecured Subordinated debt 3,247 4,556 3,215 Fixed and floating rate notes 3,857 3,425 4,232 Commercial papers 18,155 21,381 19,692 Structured notes 1,483 1,289 1,527 Secured Covered bonds 3,530 1,584 3,576 30,272 32,235 32,242 Debt Issued By Maturity Within one year 20,526 24,618 21,532 Over one year 9,746 7,617 10,710 30,272 32,235 32,242 As at 31 December 2018, the Group had S$18.16 billion of commercial papers outstanding, lower from a year ago and the previous quarter. The commercial papers form part of the Group s diversified funding sources. The covered bonds were issued by the Bank under its USD10 billion Global Covered Bond Programme. The Covered Bond Guarantor, Red Sail Pte. Ltd., guarantees the payments of interest and principal. The guarantee is secured by a portfolio of Singapore home loans transferred from OCBC Bank to Red Sail Pte. Ltd Financial Results 13

23 CAPITAL ADEQUACY RATIOS 1/ S$ million 31 Dec Dec Sep 2018 Ordinary shares 15,750 14,136 15,761 Disclosed reserves/others 19,219 18,130 18,415 Regulatory adjustments (6,901) (5,359) (6,799) Common Equity Tier 1 Capital 28,068 26,907 27,377 Additional Tier 1 capital 1,572 2,985 1,571 Regulatory adjustments (932) Tier 1 Capital 29,640 28,960 28,948 Tier 2 capital 3,347 4,673 3,353 Regulatory adjustments (1) (408) (1) Total Eligible Capital 32,986 33,225 32,300 Risk Weighted Assets 200, , ,322 Capital Adequacy Ratios Common Equity Tier % 13.9% 13.6% Tier % 14.9% 14.4% Total 16.4% 17.2% 16.1% The Group remains strongly capitalised, with a Common Equity Tier 1 ( CET1 ) capital adequacy ratio ( CAR ) of 14.0%, and Tier 1 and Total CAR of 14.8% and 16.4% respectively. These ratios were well above the regulatory minima of 6.5%, 8% and 10%, respectively, for /. The capital adequacy of the Group s significant banking subsidiaries as at 31 December 2018 were: Capital Adequacy Ratios Total Risk Common Equity S$ million Weighted Assets Tier 1 Tier 1 Total OCBC Wing Hang Bank Limited 23, % 14.2% 16.4% OCBC Bank (Malaysia) Berhad 13, % 15.0% 17.6% Bank OCBC NISP 13, % 16.6% 17.6% The capital adequacy ratios of OCBC Wing Hang Bank Limited are computed in accordance with the Banking (Capital) Rules issued by the Hong Kong Monetary Authority, and the ratios for OCBC Bank (Malaysia) Berhad are computed in accordance with the Capital Adequacy Framework (Capital Components) issued by Bank Negara Malaysia. Bank OCBC NISP computes their ratios based on the Financial Services Authority Regulation in Indonesia. 1 Public disclosures required under MAS Notice 637 can be found in the Capital and Regulatory Disclosures section of the Bank s Investor Relations website ( 2 In addition to these minimum capital requirements, Capital Conservation Buffer ( CCB ) of 2.5% and Countercyclical Buffer ( CCyB ) of up to 2.5% are being phased in from 2016 to The CCB was 1.875% on 1 January 2018 and increases by 0.625% to reach 2.5% on 1 January The CCyB is not an on-going requirement and the applicable magnitude will be the weighted average of the country-specific CCyB requirements that are being applied by national authorities in jurisdictions to which the Bank has private sector credit exposures Financial Results 14

24 PERFORMANCE BY BUSINESS SEGMENT OCBC Group s businesses are presented in the following customer segments and business activities: Global Consumer/Private Banking, Global Corporate/Investment Banking, Global Treasury and Markets, OCBC Wing Hang and Insurance. Operating Profit by Business Segment S$ million /(-) 4Q18 4Q17 +/(-) 3Q18 +/(-) % % % Global Consumer/Private Banking 1,318 1, (4) Global Corporate/Investment Banking 1,825 1, (27) Global Treasury and Markets (23) OCBC Wing Hang (4) Insurance 811 1,144 (29) (71) 239 (42) Others (88) 96 (81) Operating profit after allowances and amortisation 5,097 4, ,041 1,359 (23) 1,400 (26) Note: 1. Comparative figures have been restated with the adoption of SFRS(I) and GEH accounting policy change. Global Consumer/Private Banking Global Consumer/Private Banking provides a full range of products and services to individual customers. At Global Consumer Banking, the products and services offered include deposit products (checking accounts, savings and fixed deposits), consumer loans (housing loans and other personal loans), credit cards, wealth management products (unit trusts, bancassurance products and structured deposits) and brokerage services. Private Banking caters to the specialised banking needs of high net worth individuals, offering wealth management expertise, including investment advice and portfolio management services, estate and trust planning, and wealth structuring. Global Consumer/Private Banking s operating profit after allowances rose 7% to S$1.32 billion in FY18, led by higher net interest income and fee income, partly offset by an increase in expenses. 4Q18 operating profit was 6% higher year-on-year at S$303 million from net interest income growth, which more than offset a fall in fee income. Compared with 3Q18, operating profit declined by 4%, mainly attributable to lower fee income. Global Corporate/Investment Banking Global Corporate/Investment Banking serves institutional customers ranging from large corporates and the public sector to small and medium enterprises. The products and services offered include long-term loans such as project financing, short-term credit such as overdrafts and trade financing, deposit accounts and fee-based services such as cash management and custodian services. Investment Banking offers a comprehensive range of financing solutions, syndicated loans and advisory services, corporate finance services for initial public offerings, secondary fund-raising, takeovers and mergers, as well as customised and structured equity-linked financing Financial Results 15

25 PERFORMANCE BY BUSINESS SEGMENT (continued) Global Corporate/Investment Banking s FY18 operating profit after allowances was S$1.83 billion, 30% higher from S$1.40 billion a year ago, driven by an increase in net interest income and fee income, as well as lower allowances. 4Q18 operating profit rose 33% year-on-year to S$343 million, led by net interest income growth which was partly offset by an increase in both expenses and allowances. Quarter-on-quarter, operating profit fell by 27%, as higher net interest income, was offset by lower fee income and a rise in allowances. Global Treasury and Markets Global Treasury and Markets is responsible for the management of the Group s asset and liability interest rate positions, engages in foreign exchange activities, money market operations, fixed income and derivatives trading, and offers structured treasury products and financial solutions to meet customers investment and hedging needs. Income from treasury products and services offered to customers of other business segments, such as Global Consumer/Private Banking and Global Corporate/Investment Banking, is reflected in the respective business segments. Global Treasury s operating profit after allowances was S$501 million in FY18 and S$109 million in 4Q18, a year-onyear increase of 4% and 15% respectively. The operating profit growth for both periods was largely attributable to higher net trading income and lower allowances, partly offset by lower net interest income. Against the previous quarter, a decline in net trading income contributed to a 23% fall in operating profit. OCBC Wing Hang OCBC Wing Hang offers a comprehensive range of commercial banking and related financial services such as consumer financing, share brokerage and insurance. OCBC Wing Hang s operating profit after allowances rose 34% to S$497 million in FY18 from broad-based income growth, partly offset by an increase in allowances. 4Q18 operating profit rose 55% to S$129 million, from S$83 million a year ago, driven by income growth and a decline in expenses. Quarter-on-quarter, operating profit declined by 4%, mainly from lower net interest income and higher allowances. Insurance The Group s insurance business, including its fund management activities, is undertaken by 87.9%-owned subsidiary GEH and its subsidiaries, which provide both life and general insurance products to its customers mainly in Singapore and Malaysia. Operating profit after allowances from GEH fell by 29% to S$811 million in FY18 and was down 71% at S$138 million in 4Q18. The year-on-year decline for both periods was mainly attributable to unrealised mark-to-market losses in its investment portfolio and the prior year also included substantially higher realised gains from the divestment of investment securities. Compared with 3Q18, operating profit fell 42% mainly from weaker investment performance. After tax and non-controlling interests, GEH s contribution to the Group s net profit was S$604 million in FY18 and S$109 million in 4Q18, lower than S$863 million in FY17 and S$363 million in 4Q17 respectively. Others Others comprise mainly property holding, investment holding and items not attributable to the business segments described above Financial Results 16

26 PERFORMANCE BY BUSINESS SEGMENT (continued) Global Global Global Consumer/ Corporate/ Treasury OCBC Private Investment And Wing S$ million Banking Banking Markets Hang Insurance Others Group 2018 Net interest income 1,911 2, (126) 5,890 Non-interest income 1, ,811 Total income 3,407 3, ,125 1,072 (86) 9,701 Operating profit before allowances and amortisation 1,370 2, (114) 5,487 Amortisation of intangible assets (15) (41) (46) (102) Allowance for loans and impairment for other assets (37) (489) 6 (32) (288) Operating profit after allowances and amortisation 1,318 1, ,097 Other information: Capital expenditure Depreciation Net interest income 1,780 2, (133) 5,423 Non-interest income 1, , ,105 Total income 3,218 3, , ,528 Operating profit before allowances and amortisation 1,312 1, , ,485 Amortisation of intangible assets (15) (42) (47) (104) Allowance for loans and impairment for other assets (67) (574) (11) (3) (17) 1 (671) Operating profit after allowances and amortisation 1,230 1, , ,710 Other information: Capital expenditure Depreciation Financial Results 17